Certified Financial Planner Scottsdale AZ

Avoid Missteps after death of a Spouse

One of the most painful crises we will ever face is the loss of a spouse. If you are grieving, it is difficult to think clearly or make decisions when emotions are high.  We’ve been through this transition with many clients and friends and relatives, and we have come to understand the most common mistakes widows and widowers often make:

  1. Making decisions too quickly, while you are still grieving. When you lose your spouse, you face financial decisions that are very important. Some widows have sold their homes–thinking it’s too much upkeep or the memories are too painful–and later, they regretted making this decision. Others have prematurely changed bank or financial account titles, which unintentionally created major tax consequences.

Solution: Surviving spouses shouldn’t rush any major decision—in fact, we recommend that they not make any long-term decisions for at least six months.   Always speak with your financial advisor prior to making a change.  They will coach you to make wise decisions and not emotional ones.

  1. Relying too much on the financial advice of a caring relative instead of an expert. Those who are grieving are often surrounded by loving friends and relatives, and that support group will usually give a widow or widower lots of advice. Their intentions may be good, but the problem is that friends or family are probably not up-to-date with the latest tax laws and regulations. They also may not know all the specifics of your particular situation.

Solution: When it comes to financial and legal recommendations, a surviving spouse needs counsel from certified and skilled professionals. Politely listen to friends and family, but talk with your financial advisor before you proceed.

  1. Overlooking survivor benefits. Many widows and widowers are unaware of financial benefits that they may be entitled to as survivors. Most people think about Social Security benefits, but there may also be pensions, retirement funds, or other financial accounts that have benefits for survivors. For example, veterans and their dependents can be buried in a national cemetery for free or possibly receive an allowance toward funeral and burial expenses.

Solution: This is where advance preparation is invaluable.  Make sure that you maintain a list of all military benefits, insurance, and pension plans, bank and investment accounts, safe deposit boxes, personal assets, etc.  Keep it up to date and be sure both spouses can quickly access it if needed.

  1. Living beyond their means. Cash flow should be carefully watched after the death of a spouse, especially if the surviving spouse has not handled all the finances previously.

Solution: Make a detailed list of income and expenses. Establish a budget and revisit it every month to make adjustments as needed.

  1. Not obtaining proper insurance. When someone passes away, often the surviving spouse neglects to become familiar with their current insurance and make sure they are adequately protected.

Solution: Make a list of all your current policies and make sure you are covered. Maintaining health insurance is essential. (If the deceased spouse was insured by a company health insurance plan, the surviving spouse is eligible for coverage through COBRA for up to 36 months.) Work closely with your financial advisor to make sure you have health, homeowners, liability, and long-term care insurance if needed.

  1. Failing to create a legacy plan. Thinking about your own mortality is not easy, and it can be especially hard for widows and widowers in light of the fact that they just lost someone who was dear to them.

Solution: Legacy plans go beyond a legal will. They include “emotional assets” that you want to pass on, such as values, life lessons, instructions on caring for pets, funeral arrangements, and where to find important documents. Putting this in place will help you feel prepared should something unexpected happen.

A client of our firm called to say her husband had passed away and she was worried about what she needed to do. It was nice to be able to tell her she didn’t need to worry—we knew their affairs were in order.  All she needed to focus on was being with her family and preparing for the funeral. Once things settled down, we met in person and discussed the actions she needed to take and helped her through the entire process. Preparation while both spouses are living can bring great peace of mind when the first spouse passes away.

We also frequently work with the adult children of some of our clients (who were the second spouse to pass away).  Whenever we get a phone call that a parent has passed, it is reassuring to be able to say, “Everything is in order.  Focus on your family and then get back to us and we will guide you through this process.”  Proper planning will ease the distribution to heirs when both parents are gone.  A smooth transition of your estate may be one of the greatest gifts you give your children.


Source: Horsesmouth.com